How to find the right CTO for your business at the right time
Paul Morris is BDO’s Head of Growth Advisory. Prior to joining BDO, Paul spent 14 years with mid-market UK PE house, Livingbridge, working with businesses primarily in the technology and services sectors.
The appointment of a CTO (chief technology officer) is the one of the key hires for any fast-growth tech business. Here we look at the role of the CTO, key attributes, selection criteria, performance measures – and the all-important issue of timing…
What is a CTO and what do they do?
Let’s start with the basic job description of a CTO. This is an executive level position in a company or other entity whose occupation is focused on scientific and technological issues within the organisation.
The primary roles of the CTO are:
- to make sure the company’s technology strategy supports its business strategy
- to ensure that the business has the best and most appropriate technology for its requirements
- to build and lead the delivery capability within the technical team
- to develop and manage a technology roadmap
For me, the technology roadmap is the most important thing a CTO can deliver for the business. The roadmap will give your board and investors the confidence that this person can deliver on expectations, that they are aware of how long-term technology trends will affect your business, and that they will be able to deliver on the business’ expectations, make an impact on the bottom line and produce a return on investment.
One of the most common mistakes companies make when hiring a CTO is that they look for people who know a lot about technology, but who are unable to produce a long-term view of how technology will impact the organisation. Remember, the CTO is a C-suite, board-level position, so not only must they be an expert in their field, they must be able to deliver according to a technology roadmap that aligns with the organisation’s commercial strategy.
In general terms, the roadmap should describe the technology strategy of the business over no less than the next two years and ideally up to about four years. It should offer a clear (ideally annual or six-monthly) picture of how technology in the sector is expected to evolve, how it will impact the business and how the company can adapt. It should take into account the internal and external resources of the business and demonstrate what will be required to meet delivery expectations.
And it should act as a vision statement. By this, I mean that it should be able to adapt to unexpected events while still adhering to the business’s philosophy. The roadmap must be succinct, ideally no more than a one-pager that briefly sums up the above points and aligns with the financial forecasts of the business. And it should set reasonable, realistic timeframes and deadlines, showing the board and other stakeholders when to expect deliveries, how these will align with changes in the industry, and then help the CTO – or their successor – stay on track to meet these deadlines.
‘The CTO will build a technology strategy to support and drive your business strategy,’ says Steve Moss, a technology leader and now Director at Freeman Clarke, which places part-time permanent CTOs into mid-market businesses. ‘Because of demand for innovation in areas such as digitalisation, or the way cloud architecture is reducing capital costs while enabling rapid scalability and robust security, you want somebody who's going to understand how these new opportunities can positively disrupt your market and amplify your business. Without one, you may be unaware of existing technology blockers to your growth, or you're possibly missing out on opportunities such as digitalisation that could give your business rocket fuel and bring significant value. Fundamentally if you don't have a CTO, there’s the risk that the value of the business is not going to be maximised.’
What are the key attributes of an effective CTO?
Firstly, your CTO needs to be commercially curious. They should have a deep understanding of how your business and the market works. They should be able to demonstrate strong leadership qualities and have experience of building their own team in the past. They should be natural problem solvers who are flexible and adaptable to change. The last thing you want is a CTO who always falls back on the same old solutions.
And, while this is not mandatory for all CTOs – although in my experience I have found these particular people to make the best candidates – you might want to look for people who were coders or engineers earlier in their career. This will give them an intricate understanding of how the delivery process will work from their team members’ perspectives.
Finally, the ideal candidate should have a passion for technology, both within the business and beyond it.
" A true CTO is a rarity,’ says Steve Moss. ‘You’re looking for someone with the technology experience that is also commercially savvy, who can contribute fully to the board, and represent the company externally with investors and partners. They bring the latest digitalisation and technology ideas and trends from the marketplace into the room, where they can be a positive disrupting force, pushing the boundaries and increasing the value of the business.quot;
KPIs: How do you know that your CTO is delivering?
It’s worth reiterating that the success of your CTO is directly tied to the technology roadmap. But there are other things to bear in mind too, and before starting any selection process you should always have a plan in place as to how to measure the success of your new CTO.
Leadership: A CTO should not be a one-person tech team. Instead, they should be a natural leader who can assemble and lead a delivery team, delegate tasks efficiently, build resilience in the business and mitigate risk.
Strategic budget delivery: For your CTO to operate at the highest level of efficiency, you should be confident in giving them the freedom to exercise their expertise within the confines of a budget. Can they deliver on budget? Or do they treat the budget as an afterthought?
A great CTO should be able to stick to the costings set out in their roadmap. They should be able to understand how their costings are expected to change in the medium-term.
They should be able to demonstrate ROI at every stage. And they should be able to report on scalability – whether they will need to increase or even decrease their budget throughout the year or over a longer period.
Timely delivery: Timing is another factor that the CTO should be measured by: Can they deliver on schedule? We know that tech is a dynamic, fast-moving world, and it’s easy to get left behind. Your CTO should be able to demonstrate an understanding of how they can help the company adapt to a constantly-changing landscape, ideally in quarters or six-month intervals.
Commercial strategic sense: Allied to the timing is another key question: Can they market the product? Your CTO must be commercially aware and able to understand not only how the technology itself will change but how customers’ expectations are expected to change too.
They should have an understanding of how product marketing works and be able to work with the marketing team on everything from launching products to handling PR.
You could consider this commercial understanding to be the key difference between an IT manager, someone who is expected to deliver projects on-time and on-budget, and a CTO who sits on the board and directly feeds in to the commercial strategy of the company.
When is the right time to get a CTO?
Given that a CTO is different to an IT manager, the question now becomes: when do you know when to move from having a technology manager in your organisation to having a CTO? What is the advantage and what are the risks associated with taking this step up?
Let’s say you’re a founder or CEO of a company and let’s say you own some interesting IP. You should ask yourself the following questions:
- Do you need to build an in-house technical team?
- Do you have a medium-term technology roadmap?
- Is your technology future-proofed?
- With all your other responsibilities, do you have the time to focus on the technology strategy?
If you are unsure that you and/or an ordinary technical manager will be able to answer these questions, then you should certainly consider a CTO appointment.
‘From an investor point of view, it will be very welcome to see a business that’s thought seriously about their technology strategy and the expert leadership needed,’ says Steve Moss. ‘I think most investors, looking at the value of a business, will see a big hole if there isn’t anybody there with their arms around the technology and digital strategy. A CTO can represent the business to investors and potential partners – if the business doesn’t have someone they can talk to in plain English who clearly owns the technology strategy and can explain the business value, I imagine that would be a yellow flag.’
Full-time v part-time v interim?
If you are considering a CTO, you have to bear in mind that these people are both thin on the ground and heavy on the pocket. Do you already have someone in mind and have you already secured funding for them? Or are you going to have to convince your investors to provide funding and start your search from scratch? It could take six or even 12 months to find the right candidate, and this time-lag may not be looked on kindly by investors. A CTO salary may look disproportionately lumpy in the context of your current turnover, but weighed against the cost of the business being disrupted and left behind, it may well be a price worth paying.
Helpfully, there are several tried-and-tested options here: full-time, part-time or interim. Which is right for you?
If you are envisioning a lengthy recruitment search or hiring process, if you are not sure if your business is willing to commit to a incorporating a long-term technology strategy, or if the scale of your delivery is not predicted to be significant, you may want to consider hiring for an interim or part-time position. An interim CTO could help to prepare your development capability for when a full-time option is available, while a part-time option is a useful option if you are committed to implementing a technology strategy but are unable at the present time to secure investment or free up finances or other resources that would allow you to invest in a full-time option.
‘The main difference between interim v permanent is time,’ says Steve Moss. ‘The interim is typically a fixed duration: the end date is known as soon as they arrive or at least there's an awareness that the nature of the engagement is relatively temporary. So by definition the interim CTO is there to address a very specific need and then leave. Whether they are addressing a problem or capitalising on an opportunity, they're unlikely to be around to see it fully embedded in the business.
‘On the other hand, a permanent CTO is going to be held accountable for the short, medium and long term success of the technology strategy and what it brings to the business.
‘So there’s what businesses want and there’s also what they can afford, and that’s where we come in. Our model – part-time but permanent - is popular with the mid-market because we work on a permanent basis, we become part of your leadership team. The difference is that our CTOs are portfolio CTOs with two to four companies each. So what you're getting is the expertise of a top-calibre CTO that you may not want to or cannot pay for at this stage, at a fraction of the cost because they’re not full time; a bit like a Non-Executive Director. You’re getting that expertise, that sounding board, you’re getting someone who can work with your investors, represent the company, build the strategy, run the team. And the fact that they’re doing portfolio work probably means they’re bringing innovation from other industries as well.’
Bear in mind, however, that there are potential downsides to both interim and part-time approaches. While an interim CTO can help you to get the ball rolling, for instance, the major issue you will face down the line will be continuity. Will your full-time appointment agree with the decisions implemented by their interim predecessor? Will the interim CTO be responsible for delivering the roadmap and, if so, will the full-time appointment be happy and confident to pick up where they left off? Will they share the same medium and long-term visions for the company?
And if you opt for a part-time option, you may want to think about whether this person is likely to agree to a full-time role in the future. If they don’t, you could end up with a permanent appointment who is unable to fulfil the role to the scale the business requires, and you will therefore have to sever and replace them – a costly exercise that could attract bad publicity for the business and will again lead to continuity problems.
"A key issue for CTOs is the lack of awareness about what they do and the value they can add to the business,’ says Steve Moss. ‘But in my experience, once they've met a good CTO, someone with the technical knowledge but also the commercial acumen, ambitious CEOs very quickly realise the difference they can bring to their business, and cost starts to become less of an issue – it becomes a value conversation."
Top 3 takeaways appointing the right CTO at the right time
- Don’t allow costs to dictate
Hiring a CTO is an expensive process. You have to factor in the resources required to hire the right person, budget for their salary plus any costs they will need to build their team, and prepare the resources they’ll need to implement their roadmap.
To CEOs, board members and investors, these costs may seem excessive at first – but it is important to remember that this appointment is a long-term investment that should, if done right, deliver great value back to the business.
- Be absolutely clear about the job description
You should have no doubt as to who would make the perfect candidate, what skills and experience they should bring to the company, their personality and attributes.
You should have an understanding of what their day-to-day job will entail and what they should be expected to deliver in their first six months, first year and first two years, how you will measure their success and what resources you envision they will need to fulfil these objectives. Only when you have a fully fleshed-out idea of the right person for the job should you begin to interview against these criteria.
- Understand the CTO’s wider impact
Perhaps most important of all, make sure you understand exactly how your CTO will fit in to the business. It all goes back to the tech roadmap – that crucial document that demonstrates how the CTO will be expected to deliver value back to the company, whether by improving internal resources or delivering external products, or both.
At this early stage, you should not be concerned about choosing a candidate who is a perfectionist, but on finding someone who can just get the job done – who can create, manage and deliver on a strategy, who has their finger on the pulse and can adapt to the changing landscape and whose vision aligns with the other members of your C-suite.